Keeping Tabs on the Ninth Circuit
January 16, 2024 - This Week at the Ninth

This Week At The Ninth: Common Issues and ERISA Assignment

furniture store

This week, the Ninth Circuit considers when common issues predominate in wage-and-hour litigation and analyzes the assignment of the right to sue for nonpayment of benefits under ERISA.

MILES v. KIRKLAND'S STORES, INC.

The Court holds that a class should have been certified to pursue claims related to an employer’s rest-break policies, but not with respect to a bag-check policy that was not uniformly enforced. 

The panel: Judges Parker (CA2), Bybee, and Lee, with Judge Lee writing the opinion.

Key highlight: “When an employee challenges a company’s policy in a class action lawsuit, it may appear at first blush that liability can be determined on a class-wide basis if that policy applies to all employees. But like with so many facets of the law, the answer is—it depends.”

Background:  Plaintiff Ariana Miles had worked at Kirkland’s, which sells furniture and other home goods. On behalf of a putative class of California Kirkland’s employees, she brought suit alleging two violations of California law: that Kirkland’s had unlawfully required its employees to stay in its store while they were on their rest breaks, and that Kirkland’s had unlawfully required its employees to work without pay by conducting bag checks after they had clocked out. The district court denied class certification as to both claims, finding that common issues did not predominate.

Result:  The Ninth Circuit reversed in part and affirmed in part. With respect to Miles’ rest-break claim, the Court held that the district court had abused its discretion in denying class certification. As the Court explained, Kirkland’s had acknowledged it had a “uniform employee handbook policy requiring employees to remain on premises during their 10-minute paid rest breaks.” The Court emphasized that such a uniform policy was not, standing on its own, enough to satisfy Rule 23’s predominance inquiry—courts must still “look at evidence of whether the company consistently implemented and enforced the policy across all employees during the class period.” But here, the Court held, the district court had clearly erred in finding that Kirkland’s evidence demonstrated that it did not enforce this policy. In fact, while the primary declarations on which the district court relied related to store conditions in 2021, the relevant claim (and policy) related to the period between 2014-2018. And Kirkland’s other declarations showing that a few employees might have left the store during their rest breaks within the relevant time period could not defeat predominance, as “a smattering of examples involving a few isolated cases does not automatically defeat class certification if, as here, the overwhelming evidence shows that the company consistently enforced its policy across all employees.”

The Ninth Circuit affirmed, however, with respect to the bag-check claim. While Kirkland’s also had a uniform policy with respect to bag checks, the district court had sufficient basis for finding that Kirkland’s did not uniformly enforce that policy. The Court of Appeals emphasized evidence showing that Kirkland’s enforced the policy only sporadically and that different stores had enforced it in different ways (including some that conducted the bag check before employees clocked out). Moreover, the Court noted, not every employee necessarily brought a bag to work every day, meaning individualized inquiries would be necessary to resolve each proposed class member’s claim.

SOUTH COAST SPECIALTY SURGERY CENTER, INC. v. BLUE CROSS OF CALIFORNIA

The Court holds that patients’ assignment of the right to benefits under an ERISA-governed healthcare plan includes assignment of the right to sue for nonpayment of those benefits.

The panel: Judges Graber, Mendoza, and Desai, with Judge Mendoza writing the opinion.

Key highlight:  “[A]n assignment of the right to benefits generally includes the right to sue for nonpayment of benefits.”

Background: The Employee Retirement Income Security Act of 1974 (ERISA) establishes standards governing retirement and health plans in the private sector. It gives plan participants the right to sue insurers for plan benefits. Plaintiff South Coast Specialty Surgery Center, Inc. (“South Coast”) is an ambulatory surgery center. Some of South Coast’s patients were insured under ERISA-governed health plans. South Coast requires patients to sign an “Assignment of Benefits” form, which authorizes insurers to pay South Coast directly “for the medical and surgical benefits allowable, and otherwise payable to [the patient] under [the patient’s] current insurance policy.” The form also authorized South Coast to file claims with insurers on the patient’s behalf.

Defendant Blue Cross of California d/b/a Anthem Blue Cross (“Anthem”) is an insurer that provides coverage to many South Coast patients. South Coast alleges that Anthem failed to fully reimburse it for the cost of medical services on 150 claims. South Coast sued Anthem under ERISA, claiming that Anthem failed to follow plan terms and conditions. The district court dismissed the complaint, holding that South Coast did not have authority to bring an ERISA claim.

Result: The Ninth Circuit reversed. It held that, while healthcare providers do not have direct authority to sue under ERISA, they can have derivative authority to do so if they have received a valid assignment of that right. Generally, ERISA empowers plan participants, beneficiaries, and fiduciaries to bring a civil action. 29 U.S.C. § 1132(a)(1)(B)(3). The Ninth Circuit stated that healthcare providers do not fall within any of these three categories, so they have no direct authority to sue. But ERISA also permits plan participants to assign their benefits to a healthcare provider, authorizing the provider to bring a derivative claim on their behalf. 

Turning to the facts of this case, the Ninth Circuit held that South Coast’s “Assignment of Benefits” form assigned it the right to sue for benefits under ERISA. First, the Court concluded that the form was a valid assignment. The Court relied on the fact that the form was entitled “Assignment of Benefits” and that the language authorizing insurers to pay South Coast for benefits conveyed an intent to assign those benefits. 

Second, the Court held that the assignment of benefits included the right to sue for nonpayment of those benefits. The Court acknowledged that the form did not expressly state that South Coast was authorized to sue insurers on the patients’ behalf. But the Court reasoned that assigning the right to benefits included the right to sue for nonpayment of those benefits. The Court stated that this holding served ERISA’s purpose of protecting plan participants by allowing them to transfer responsibility to litigate unpaid claims to providers who were better positioned to do so. Otherwise, to recover unpaid benefits, providers would have to file individual actions against each patient, who would then have to decide whether to pay or pursue individual actions against the insurer. The Court concluded that this inefficiency would undermine ERISA’s goals.

The Court noted that its holding was consistent with its prior precedents and the decisions of other Courts of Appeals. The Court cautioned, however, that not all assignments of benefits would necessarily transfer the right to sue. It distinguished, for example, its prior holding that a lawyer “who aggregated hundreds of unrelated claims from numerous different health facilities, akin to a bill-collector,” had no right to sue. Bristol SL Holdings, Inc., 22 F.4th 1086, 1090 (9th Cir. 2022). Unlike that lawyer, South Coast was a “healthcare provider with a direct financial stake in the outcome and an established relationship with its patients through its ‘Assignment of Benefits’ form.”